Louisiana crude prices enjoy sweet ride

Louisiana Sweet crude oil produced in the Gulf of Mexico continued to trade at a premium compared with other U.S. crude products through February, a trend that is helping to boost revenues for oil and gas companies focused on fields located off the state coastline.

Light Louisiana Sweet crude prices averaged $116.30 per barrel in February, a 7.4 percent increase from November 2012, according to updated data from the Louisiana Department Natural Resources today. That’s $20 more than West Texas Intermediate crude, the benchmark for U.S. oil prices, which traded at $95.31 per barrel on average during the same month.

Light Louisiana Sweet is the low-sulfur, low-density oil produced in state and federal waters off the Louisiana coast. WTI crude is a similar low-sulfur, low-density oil refined mostly in the Midwest and along the Gulf Coast.

The DNR report attributes the climb in Light Louisiana Sweet crude prices to the improving economy, namely rising employment and improved home sales, as well as pipeline constraints that have staunched the flow of oil shipments from the Midwest to southern oil refineries.

Bloomberg reported in late January that Enterprise Products Partners had run into “unforeseen constraints” that would limit the capacity of its 500-mile Seaway pipeline, which connects the Cushing, Okla., oil storage hub to the Freeport, Texas area.

Prices for Light Louisiana Sweet as well as its higher density version, Heavy Louisiana Sweet, have been on the rise since.

Thomas Cooke, CEO of Saratoga Resources Inc., which drills in the state waters off the Louisiana coast, said in a recent interview with CityBusiness that the rising price differential helped guide the company’s decision to target more oil-rich reserves in 2013.

EPL Oil & Gas, which produces oil and gas on the Outer Continental Shelf off the Louisiana coast, noted the rising prices helped drive higher returns for the company during the fourth quarter last year. EPL posted a net gain of $24.2 million for the quarter.

The company earned an average of $106.07 per barrel of crude oil during same period, well above comparative benchmarks, though lower than the $116.40 per barrel the company fetched during the fourth quarter 2011.

Louisiana Light Sweet prices ended 2011 at an average of $113.44 per barrel and peaked at an average of $120.56 per barrel in April 2012.

Though Louisiana Sweet prices have steadily climbed back toward those levels in recent months, the DNR predicts higher U.S. crude oil stockpiles and slower economic growth during the fourth quarter 2012 will put downward pressure on prices in coming months.